R.B. Shreeram Durgaprasad Ltd. vs Commissioner of Income Tax

V.A. Mohta, J.—Following question has been referred for opinion of this Court u/s 66(1) of the Indian income tax Act, 1922 (''the Act'') at the behest of the assessee : "Whether, on the facts and in the circumstances of the case, when the ITO passed an order u/s 23A(1) on 27-2-1971 in respect of assessment year 1956-57 on the basis of total income as determined in a reassessment, the earlier order passed u/s 23A(1) on 10-11-1967 on the basis of the total income as determined in the original assessment remained valid and legal?"

Reference related to the order of the Tribunal dated 27-5-1974 u/s 23A of the Act for the assessment year 1956-57 for which corresponding accounting year ended on Diwali 1955. Then assessee was a private limited Company. It had declared dividend of Rs. 2,77,500 for the year ended on Diwali 1955. Its assessment was made in the first instance by order dated 31-5-1960 determining total income of Rs. 13.05 lakhs. Dividend declared fell short of statutory requirement and hence ITO passed an order dated 19-11-1967 u/s 23A determining the additional super tax at Rs. 1.13 lakhs.

While assessee''s appeal to the AAC against the order u/s 23A dated 10-11-1967 was pending, the ITO made reassessment for the assessment year 1956-57 u/s 147(a), read with section 144. By the reassessment order dated 18-3-1970, total income was determined at Rs. 46.62 lakhs. On 31-8-1970, the AAC dismissed the appeal against the order dated 10-11 -1967. The assessee filed second appeal to the Tribunal against the said order. During pendency of this second appeal, ITO passed second order dated 27-2-1971 u/s 23A(1) on the basis of reassessed income and determined additional super tax at Rs. 8.70 lakhs. The Tribunal upheld the order dated 27-2-1971. The Tribunal took a view that-

(a) the first order was not nullified because of the second order,

(b) there was no technical bar to passing more than one order u/s 23A for the same year,

(c) but, in such situation, the assessee was quite obviously entitled to credit for the tax, if any, paid pursuant to the first order.

The Tribunal reasoned that in case the first order is held to be nullified by the second order, the result would be total escapement of the levy of super-tax even as per the first order in the event of the second order falling through because of some fault in the reassessment proceedings.

It seems to us that reference has only academic value since the second order has become final and the Tribunal has already held that in the total liabilities the assessee is entitled to credit for the tax, if any, paid pursuant to the first order.

Theoretically speaking, whether theory of merger applied or not, it is clear that there cannot be at one and the same time more than one operative order governing the same subject-matter. If second order falls, though for some technical reason, the first order revives. It is needless to mention that credit after proper calculation of the total liabilities as envisaged in the Tribunal''s order, if really due, would be given. Question arose answered accordingly. No order as to costs.